By Ketki Saxena
Investing.com - Canadian inflation moderated to 5.9% in January, the first time since February 2022 that the Consumer Price Index has ticked in below 6%.
The reading was cooler than the 6.3% seen in December and the 6.1% year over year increase expected by analysts.
Statistics Canada noted that the annual rate was impacted by downward pressure from the “base-year effect” of January 2022, when prices had risen sharply following Russia-Ukraine tensions and supply chain disruptions. The “base year effect” refers to the fact that the monthly increase in January 2023 (+0.5%) was smaller than the monthly increase in January 2022 (+0.9%).
On a monthly basis, Canadian inflation was up 0.5%, following a 0.6% decline in December and lower than analyst expectations for a 0.7% reading.
Looking at essentials, grocery prices continued to rise, up 10.4% on an annual basis in January, driven by prices for meat, bakery goods, and vegetables. Fresh and frozen chicken meanwhile recorded the fastest growth, attributed to seasonal demand and impact from the avian flu.
Gasoline prices contributed the most to the month-over-month increase in the CPI, up 2.9% on an annual basis.
Shelter prices increased but decelerated, rising 6.6% in January after a 7.0% increase in December as costs continued to decelerate amid the ongoing cooling of the housing market. Mortgage interest costs, however, rose 21.2% on an annual basis in January, the largest increase since 1982, as the Bank of Canada attempts to cool inflation by ratcheting up interest rates.
Cellular service prices fell 7.9% on a year-over-year basis in January, as many Boxing Day sales extended into January.
Excluding food and energy, prices rose 4.9% on an annual basis in January, compared with a rise of 5.3%. The average of two of the central bank’s core measures of underlying inflation, CPI-median and CPI-trim, came in at 5.1% compared to a 5.3% reading in December.